Pledge of a Subsoil Use Right

Pledge of a Subsoil Use Right

On 24 June 2010, a new Law on Subsoil and Subsoil Use (the “Subsoil Law”) was adopted in Kazakhstan. According to the Subsoil Law, transfer of a subsoil use right (or a part thereof) or related objects into pledge shall be performed upon approval of the competent authority. Moreover, the Subsoil Law establishes regulations in the area of pledge of subsoil use right. For instance, borrowed funds obtained against the pledge of subsoil use right shall be only used for the purpose of subsoil use within the respective subsoil use contract.

Obtaining permit to transfer subsoil use right into pledge is a long-time process that includes collection of information and documents. According to the current subsoil use legislation, the period for consideration of the application is seventy business days. According to our practice, however, this process can take up to six months.

Experience:

• advising on transfer of subsoil use right or/and related objects (interests, block of shares in legal entity holding the subsoil use right) into pledge;
• advising in connection with drafting application for obtaining permit to transfer subsoil use right or/and related objects into pledge (surcharge) and representation of interests of a client at the stage of consideration of the application by the competent authority;
• advising in connection with drafting  pledge agreement for  subsoil use right and related objects;
• registration of pledge agreement with the competent authority;
• advising on levying of execution on the pledged subsoil use right and related objects including procedure for pledge selling.

Publications:

• The changes in the investment climate due to the adoption of the new law on subsoil and subsoil use